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Harvey Norman to face tough AGM questions

Harvey Norman's board members are expected to face tough questions about dividends, franchisees and their own independence when they front shareholders this week.

The Australian Shareholders Association is urging investors to vote against all of the furniture and electrical goods retailer's resolutions at Thursday's annual general meeting, including the re-election of co-founder Gerry Harvey as executive chairman.

ASA monitor Allan Goldin said the association is concerned about a lack of new faces on the board, a reduction in dividends despite profit growth, and how the company reports its financial exposure to franchisees.

Mr Goldin said the Harvey Norman board effectively has no independent directors, with the majority either being employed by the company or having a more than five per cent stake in the company.

Harvey Norman's independent directors are Ken Gunderson-Briggs, who has held his position since 2003, and Graham Paton, who was appointed in 2005 and is up for re-election at the AGM.

"There are very few directors who stay on boards more than 12 years, because they understand if they are there for that long they start to identify too much with the company and executives and stop looking at it from a shareholders' perspective," Mr Goldin said.

"Mr Harvey leads a board that, through the intentional lack of renewal, is about to be totally non-independent and we will vote our undirected proxies against him."

He said the ASA also wants more clarity on the group's financial accounts, even though the Australian Securities and Investments Commission recently dropped its review of Harvey Norman's 2016 financial report.

Concerns have previously been raised in the media about the way the company reports its financial exposure to franchisees.

"Harvey Norman has announced that it will no longer guarantee the payments on behalf of franchisees; so if a franchisee owes money to a supplier that is their responsibility and no longer is the company stepping in to pay up," Mr Goldin said.

"If that is the case, we want to know how many have handed back their franchise or gone into receivership?"

At last year's AGM, Mr Harvey accused critics, including Mr Goldin, of manufacturing concerns about the transparency of his franchisees' accounts in attempt to drive down his company's share price for short-sellers.

Comment was sought from Harvey Norman.